Yellen Speech

April 16th, 2014 12:52 pm | by John Jansen |

There is nothing new in the Yellen speech. She does cite all the factors which the Committee will assess when it decides on labor market slack. She avers that some of this is “nuanced” judgement which I think that they can do whatever they wish whenever they feel like. She also cites the lingering effects of the crisis and the probability that growth will remain below pre crisis levels for a number of years. This paragraph near the very end of her discourse struck me as informative as I think it is dripping with the view that short term rates will be anchored near zero for a very long time:

“Finally, the Committee began explaining more fully how policy may operate in the period after liftoff, indicating its expectation that economic conditions may, for some time, warrant keeping short-term interest rates below levels the Committee views as likely to prove normal in the longer run. FOMC participants have cited different reasons for this view, but many of the reasons involve persistent effects of the financial crisis and the possibility that the productive capacity of the economy will grow more slowly, at least for a time, than it did, on average, before the crisis. The expectation that the achievement of our economic objectives will likely require low real interest rates for some time is again not confined to the United States but is shared broadly across many advanced economies.26 Of course, this guidance is a forecast and will evolve as we gain further evidence about how the economy is operating in the wake of the crisis and ensuing recession.”

The curve has flattened over the last hour and 5s 30s which was 185.3 at 950AM is now 181.9. In the post March 19 flattening I do not believe that we have been much flatter than 179. (Once again I do not have a charting service and that is from memory so please yell and correct me if I am wrong. )

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  1. 2 Responses to “Yellen Speech”

  2. By steve on Apr 16, 2014 | Reply


    you have one good memory and I’m jealous.

    long time reader/fan since before coming out of retirement and glad to see you back up here … donno how to post a visual OF 5s30s here in comments SO have attempted to create link:

    hopefully that works. 5yrs of 5s30s from bbg


  3. By John Jansen on Apr 16, 2014 | Reply

    I remember spreads and bond auctions from 30 year ago but not what I had for dinner last night.

    Thanks for the compliments and for being long time reader.


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